Nov 13 2007
CREDIT CARD PROCESSING 101: UNLOCKING THE SECRETS
The trillion dollar credit card processing industry is subject to limited state and federal regulation. Credit card processors can charge what they want and hide their fees any way they want. As a supporter of full disclosure and a territory manager of Heartland Payment Systems (the 6th largest processor in the country), I have compiled a list of favorite tricks that credit card processors use on a merchant's statement to increase the processor's profit. These tricks negatively impact your bottom line.
- The rate you were quoted is not the rate you are paying.Many busy merchants do not have time to check the bottom line payment on their businesses' statements to ensure that they are receiving the advertised rate they were promised. This takes just five minutes. Divide what you are paying by the amount that is recorded as being processed. Does the rate you were quoted match this rate? Probably not.Why? Because you signed on based on a "qualified rate".
Qualified is a term fabricated by processors to lure you into thinking that you are paying one rate when, in fact, you are paying nothing of the sort.
- You are seeing only three of four "tiers" on your statement.Tiers are different rates that credit card companies charge retailers for the privilege of being able to take credit cards. MasterCard and Visa have close to 200 different tiers called Interchange. Interchange rates (also known as wholesale rates) are based on the type of merchant (retail, restaurants, supermarket, gas station, etc.), the type of card (debit, rewards, corporate, etc.) and the type of transaction (card-swiped, over the phone, etc.). You can view these rates on Visa and MasterCard's websites.If your statement shows only three or four different tiers (often labeled non-qualified, midqualified and qualified, which are arbitrary fabrications by credit card processing companies), you are doing the credit card equivalent of making a 30-second phone call but are paying for a full minute. The processors simplify the 200 original rates - and make it more profitable for themselves - by rounding up to the highest of their completely arbitrary tiers.
- The statement is hiding fees that your credit card processor has already taken out.
For example, many times your bill will state, " Total amount of charges to your account: $1,000." But then there is a small line item that mentions a "less discount paid", which is the money the processor has deducted every day from your account.
By removing a fixed daily amount, credit card processors can lessen the number they trumpet as total charges and hide the fees they charge. This amount is not part of that $1,000 mentioned in big letter. You are paying more than what is stated in big letters.
The more information you have , the better decision you can make when choosing a credit card processor. The choices are varied, and making the right one can add thousands of dollars to your organization's bottom line with no extra work.
Chuck Cohen is the Broward County territory manager for Heartland Payment Systems. Heartland Payment Systems is the 6th largest credit/debit card processor in the nation, processing more than $55 billion in electronic transactions annually. Heartland is traded on the NYSE (symbol: HPY) and is SAS 70 Type 1 compliant. Heartland is the only credit/debit card processor and payroll processor endorsed by the Florida Restaurant and Lodging Association (FRLA). Chuck Cohen can be reach at 954.275.2573 or charles.cohen@e-hps.com.
